In a contingent immunization strategy, the difference between the
initially available immunization level and the safety-net return.

Safety-net return

The minimum available return that will trigger an immunization
strategy in a contingent immunization strategy.

Samurai market

The foreign market in Japan.

Savings deposits

Accounts that pay interest, typically at below-market interest rates,
that do not have a specific maturity; and that usually can be withdrawn upon demand.

Scalp

To trade for small gains. It normally involves establishing and liquidating a
position quickly, usually within the same day.
scenario analysis The use of horizon analysis to project bond total returns under
different reinvestment rates and future market yields.

Search costs

Costs associated with locating a counterparty to a trade, including
explicit costs (such as advertising) and implicit costs (such as the value of
time). Related: Information costs

Secondary market

The market where securities are traded after they are initially
offered in the primary market.

Securities analysts

Related: Financial analysts

Securitization

The process of creating a passthrough, such as the mortgage pass-
through security, by which the pooled assets become standard securities backed by
those assets.

Security deposit (initial)

Synonymous with the term margin. A cash amount of funds
that must be deposited with the broker for each contract as a guarantee of fulfillment
of the futures contract. It is not considered as part payment or purchase. Related: Margin

Security deposit (maintenance)

Related: Maintenance margin
security market line (SML) .

A description of the risk return relationship for individual
securities, expressed in a form similar to the capital market line.

Sell hedge

Related: Short hedge

Sell limit order

conditional trading order that indicates that a, security may be sold
at the designated price or higher. Related: Buy limit order

Sell-side analyst

Also called a Wall Street analyst, a financial analyst who works for
a brokerage firm and whose recommendations are passed on to the brokerage firm's
customers.

Selling short

A trade in which the investor (working through a broker) borrows a
security, sells it, repurchases it at a later time, and then returns it to the party who
initially loaned the security. If the price has fallen, the short seller profits. When the
security is returned, the investor is said to have "covered the short position."

Semistrong form efficiency

A form of pricing efficiency where the price of the
security fully reflects all public information (including, but not limited to, historical price
and trading patterns). Compare weak form efficiency and strong form efficiency.

Serial bonds

Corporate bonds arranged so that specified principal amounts become
due on specified dates. Related: Term bonds

Settlement date

Also called the delivery date, the designated date at which the
parties to a futures contract must transact.

Settlement Price

A figure determined by the closing range which is used to calculate
gains and losses in futures market accounts. Settlement prices are used to determine
gains, losses, margin calls, and invoice prices for deliveries. Related: Closing range

Settlement rate

The rate suggested in Financial Accounting Standard Board (FASB)
87 for discounting the obligations of a pension plan. The rate at which the pension
benefits could be effectively settled ff the pension plan wished to terminate its pension
obligation.

Shareholders' letter

A section of an annual report where one can find jargon-free
discussions by management of successful and failed strategies which provides
guidance for the probing of the rest of the report.

Sharpe benchmark

A statistically created benchmark that adjusts for a managers'
index-like tendencies.

Sharpe Index

A measure of a portfolio's excess return relative to the total variability
of the portfolio. Related: Treynor Index

Short

One who has sold a contract to establish a market position and who has not
yet closed out this position through an offsetting purchase; the opposite of a
long. Related: Long

Short hedge

The sale of a futures contract(s) to eliminate or lessen the possible
decline in value ownership of an approximately equal amount of the actual financial
instrument or physical commodity. Related: Long hedge

Short position

In the cash market, a sale of securities not owned. The securities
sold are borrowed. In the futures market, the sale of a futures contract with no
offsetting long position. In the options market, the sale of an option with no offsetting
long position.

Short selling

Establishing a market position by selling a futures contract.

Short squeeze

A situation in which a lack of supply tends to force prices upward.
short straddle A straddle in which one put and one call are sold.

Short-term solvency ratios

Ratios used to judge the adequacy of liquid assets for
meeting short-term obligations as they come due, including (1) the current ratio, (2)
the acid-test ratio, (3) the inventory turnover ratio, and (4) the accounts receivable
turnover ratio.

Shortfall risk

The risk of falling short of any investment target.

Simple linear regression

A regression analysis between only two variables, one
dependent and the other explanatory.

Simple linear trend model

An extrapolative statistical model that asserts that
earnings have a base level and grow at a constant amount each period.

Simple moving average

The mean, calculated at any time over a past period of fixed
length.

Single-index model

Related: Market model

Single-premium deferred annuity

An insurance policy bought by the sponsor of a
pension plan for a single premium. In return, the insurance company agrees to make
lifelong payments to the employee (the policyholder) when that employee retires.

Sinking fund requirement

A condition included in some corporate bond indentures
that requires the issuer to retire a specified portion of debt each year. Any principal
due at maturity is called the balloon maturity.

Small-firm effect

The tendency of small firms (in terms of total market capitalization)
to outperform the stock market (consisting of both large and small firms).

Specialist

On an exchange, the member firm that is designated as the market maker
(or dealer for a listed common stock. Only one specialist can be designated for a
given stock, but dealers may be specialists for several stocks. In contrast, there can
be multiple market makers 'in the OTC market.

Speculator

One, who attempts to anticipate price changes and, through buying and
selling contracts, aims to make profits. A speculator does not use the market in
connection with the production, processing, marketing or handling of a product.

Speed

Related: Prepayment speed

Spot markets

Related: Cash markets

Spot month

The nearest delivery month on a futures contract.

Spot price

The current market price of the actual physical commodity. Also called
cash price.

Spot rate

The theoretical yield on a zero-coupon Treasury security.

Spot rate curve

The graphical depiction of -the relationship between the spot rates
and maturity.

Spread

The simultaneous purchase and sale of separate futures or options
contracts for the same commodity for delivery in different months. Also known as a
straddle.

Spread income

Also called margin income, the difference between income and cost.
For a depository institution, the difference between the assets it invests in (loans and
securities) and the cost of its funds (deposits and other sources).

Spread strategy

A strategy that involves a position in one or more options so that
the cost of buying an option is funded entirely or in part by selling another option in
the same underlying.

Standard deviation

The square root of the variance. A measure of dispersion of a
set of data from their mean.

Standardized value

Also called the normal deviate, the distance of one data point
from the mean, divided by the standard deviation of the distribution.

Stated conversion price

At the time of issuance of a convertible security, the price
the issuer effectively grants the securityholder to purchase the common stock, equal to
the par value of the convertible security divided by the conversion ratio.

Statutory surplus

The surplus of an insurance company determined by the
accounting treatment of both assets and liabilities as established by state
statutes. Related: Regulatory surplus, Economic surplus

Steepening of the yield curve

A change in the yield curve where the spread between
the yield on a long-term and short-term Treasury has increased. Compare flattening
of the yield curve and butterfly shift.

Step-up bond

A bond that pays a lower coupon rate for an initial period which then
increases to a higher coupon rate. Related: Deferred-interest bond, Payment-in-kind bond

Stochastic models

Liability-matching models that assume that the liability payments
and the asset cash flows are uncertain. Related: Deterministic models

Stock exchanges

Formal organizations, approved and regulated by the Securities
and Exchange Commission (SEC), that are made up of members that use the facilities
to exchange certain common stocks. The two major national stock exchanges are the
New York Stock Exchange (NYSE) and the American Stock Exchange (ASE or
AMEX). Five regional stock exchanges include the Midwest, Pacific, Philadelphia,
Boston, and Cincinnati. The Arizona Stock Exchange is an after hours electronic
marketplace where anonymous participants trade stocks via personal computers.

Stock index option

An option in which the underlying is a common stock index.

Stock market

Also called the equity market, the market for trading equities.

Stock option

An option in which the underlying is the common stock of a
corporation.

Stock replacement strategy

A strategy for enhancing a portfolio's return, employed
when the futures contract is expensive based on its theoretical price, involving a swap
between the futures, Treasury bills portfolio and a stock portfolio.

Stop-limit order

A stop order that designates a price limit. In contrast to the stop
order, which becomes a market order ff the stop is reached, the stop-limit order
becomes a limit order ff the stop is reached.

Stop order (or stop)

An order to buy or sell at the market when a definite price is
reached, either above (on a buy) or below (on a sell) the price that prevailed when the
order was given.

Straddle

urchase or sale of an equal number of puts and calls with the same terms
at the same time. Related: Spread

traight value

Also called investment value, the value of a convertible security without
the con-version option.

Stratified equity indexing

A method of constructing a replicating portfolio in which the
stocks in the index are classified into stratum, and each stratum is represented in the
portfolio.

Stratified sampling approach to indexing

An approach in which the index is divided
into cells, each representing a different characteristic of the index, such as duration or
maturity.

Stratified sampling bond indexing

A method of bond indexing that divides the index
into cells, each cell representing a different characteristic, and that buys bonds to
match those characteristics.

Strike index

For a stock index option, the index value at which the buyer of the
option can buy or sell the underlying stock index. The strike index is converted to a
dollar value by multiplying by the option's contract multiple. Related: Strike price

Strike price

The price at which an option can be converted by exercise into the
underlying futures contract.

Strong form efficiency

Pricing efficiency, where the price of a, security reflects all
information, whether or not it is publicly available. Related: Weak form efficiency, Semistrong
form efficiency

Structured portfolio strategy

A strategy in which a portfolio is designed to achieve
the performance of some predetermined liabilities that must be paid out in the future.

Structured settlement

An agreement in settlement of a lawsuit involving specific
payments made over a period of time. Property and casualty insurance companies
often buy life insurance products to pay the costs of such settlements.

Subject to opinion

An auditor's opinion reflecting acceptance of a company's
financial statements subject to pervasive uncertainty that cannot be adequately
measured, such as information relating to the value of inventories, reserves for losses,
or other matters subject to judgment.

Subordinated debenture bond

An unsecured bond that ranks after secured debt,
after debenture bonds, and often after some general creditors in its claim on assets
and earnings. Related: Debenture bond, Mortgage bond, Collateral trust bonds

Subperiod return

The return of a portfolio over a shorter period of time than the
evaluation period.

Substitution swap

A swap in which a money manager exchanges one bond for
another bond that is similar in terms of coupon, maturity, and credit quality, but offers
a higher yield.

Surplus management

Related: Asset management

Swap assignment

Related: Swap sale

Swap buy-back

The sale of an interest rate swap by one counterparty to the other,
effectively ending the swap.

Swap option

Related: Quality option

Swap reversal

An interest rate swap designed to end a counterparty's role in
another interest rate swap, accomplished by counterbalancing the original swap in
maturity, reference rate, and notional amount.

Swap sale

Also called a swap assignment, a transaction that ends one
counterparty's role in an interest rate swap by substituting a new counterparty whose
credit is acceptable to the other original counterparty.

Swaptions

Options on interest rate swaps. The buyer of a swaption has the right to
enter into an interest rate swap agreement by some specified date in the ' future. The
swaption agreement will specify whether the buyer of the swaption will be a fixed-rate
receiver or a fixed-rate payer. The writer of the swaption becomes the counterparty to
the swap if the buyer exercises.

Switching

Liquidating an existing position and simultaneously reinstating a position
in another futures contract of the same type.
symmetric cash matching An extension of cash flow matching that allows for the short-
term borrowing of funds to satisfy a liability prior to the liability due date, resulting in a
reduction in the cost of funding liabilities.

Synchronous data

Data available at the same time. In testing option-pricing models,
the price of the option and of the underlying should be synchronous, representing the
same moment in the market.

Systematic risk

Also called undiversifiable risk or market risk, the minimum level of
risk that can be obtained for a portfolio by means of diversification across a large
number of randomly chosen assets. Related: Unsystematic risk